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CBK senior managers linked to Imperial Bank fraud

The relationship between senior managers of the collapsed Imperial Bank and Central Bank of Kenya (CBK) officials was too intimate to allow proper regulation of the bank, states court documents.

The bank’s shareholders have stated in the court papers that they have since established there was improper exchange of favours, where the bank’s senior managers and CBK officials assisted each other to secure jobs for their friends. The shareholders said the move was not appropriate between a bank and a regulator.

“It is obvious that the bank managers and those from CBK did not conduct their relationship at the arms-length and a straightforward way appropriate and expected between a regulator and a business it supervises and regulates by virtue of the law,” states the shareholders.

The shareholders have filed their latest response to an application by the Kenya Deposit Insurance Corporation (KDIC) and CBK, which have sought to freeze their assets to recover Sh45 billion loss said to have led to the bank’s collapse.

Mr Anwar Hajee, a director in one of the shareholding firms, has said in the court papers that CBK officials had prior information about the unhealthy status of the bank’s books but had over the years colluded with the former Group Managing Director Abdulmalek Janmohamed and other senior officers of the bank to provide false financial data together with regulatory reports which CBK deliberately doctored.

“This was done in order to ensure that the shareholders and non-executive directors would remain in the dark about the fraud,” says Mr Hajee.

He adds that instead, the regulator remained complacent in the fraud as a number of individuals at CBK benefited from loans made by the bank. He says there were instances of generous tolerance on late payment and irregular promises of credit that were granted to individuals at CBK.

The shareholder adds that an official from CBK had in an email sent to one of the senior managers at Imperial claimed that he had been assured by Mr Janmohamed in 2004 that his children would never lack school fees as long as the bank was in operation. The shareholders want the court to stop the planned liquidation of the bank by KDIC and CBK, and instead allow restricting to commence.

CLOSE RELATIONSHIP

According to court papers, Imperial’s former Group Managing Director Abdulmalek Janmohamed also had a close relationship with former CBK governor Njuguna Ndung’u to a point where he had even sought to assist Lime Technologies to sell a fraud prevention software to CBK.

“It is deeply troubling that the Governor of CBK should allow the MD of one of the financial institutions regulated by CBK to be so intimately involved in the procurement of CBK’s anti-fraud system,” Mr Hajee states.

The shareholders said the fact that, at the same time, officers of CBK were fully aware of the fact that Mr Janmohamed was himself actively engaged in a systematic fraud and embezzlement on a massive scale, and were actively colluding with him to suppress it, “underlines the risks caused by such inappropriate relationships of influence.”

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